Now is Cyprus - Bailout may equal half its economy

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NICOSIA — Cyprus, the fifth euro zone country to seek emergency funding from Europe, may need a bailout of up to 10 billion euros — over half the size of its economy — officials said on Tuesday.

The Mediterranean island, with a banking sector heavily exposed to debt-crippled Greece, said on Monday it was formally applying for help from the European Union's rescue funds.

Cyprus is the euro zone's third smallest economy but it joins Greece, Ireland, Portugal and Spain in seeking EU rescue funds to try and stay afloat, and is the latest sign that policymakers have failed to stop the debt crisis spreading.

European leaders will meet at a summit on Thursday and Friday but they are not expected to come up with a lasting solution to the region's problems that have also sent Italy's borrowing costs soaring.

Exact amount undecided Two euro zone officials said that a package of up to 10 billion euros was being considered for the 17.3 billion euro Cyrpriot economy.

"The exact number has not been decided yet. It was to be 6 billion for the state financing and 2 billion for the banks but that is optimistic — it is more likely to be seven and three — up to 10 billion euros in total," one euro zone official said.

A second official confirmed the amount was likely to be up to 10 billion euros, a massive bill for Cyprus.